Poverty in India: Am I Poor? Where is the Poverty Line?

With a population of 1.21 billion, India is the world’s largest democracy and is set to become the most populous country by around 2030. In the past decade, the country has witnessed accelerated economic growth, emerged as a global player with the world’s fourth largest economy in purchasing power parity (PPP) terms, and made progress on most of the Millennium Development Goals, but will still miss out on the target of halving poverty by 2015. This is due to two factors: (1) Uneven economic development: the recent high economic growth has remained limited to urban pockets and people in corporate sectors. Rural India where 75% poor live is expected to benefit only through the “trickle down effect”. (2) Population growth: Although the rate of population growth is slowing but is still a concern; it negates the economic development.

India is home to over one-third of poor people in the world. Add to this the poor of Pakistan and Bangladesh and you find that almost half of world poverty exists in South Asia. The next big concentration of poverty is in the sub-Saharan Africa. Certainly India is advancing economically, but there are pockets of poverty that have parallel only in sub-Saharan countries. In comparison, the current decade has seen significant progress in poverty reduction in China and East Asia. For example, World Bank estimates that by 2015 only about 5% Chinese population will be in extreme poverty; India on the other hand will still have over a quarter of its population in dire poverty.

The sheer size of the population coupled with highly unequal development across the country demands a serious attention to the issue of poverty. It is not something that can be wished away.

Lack of sufficient income and resources are both symptoms of poverty as well as its cause. The poor are generally deprived of sufficient nutritious food, shelter, safe drinking water, healthcare, education, and employment choices. Deprivation can take many forms and has human and social angles because poverty means insecurity, powerlessness and exclusion of individuals, households and communities. It means susceptibility to discrimination, exploitation, and violence.

Poverty has traditionally been measured in terms of some minimum income level, but it is an over-simplistic and inadequate measure. In fact, poverty is a development issue and has several dimensions that sustain and promote it. Equating it with mere lack of income is taking a very narrow view of it. Therefore, composite poverty indicators have been devised that give better indication of the socioeconomic reality of the society.

Until very recently the official Indian poverty lines was linked to consumption of certain number of calories and the government was happy to states that only 27% population is poor. However, now a new measure of poverty has been adopted that includes status education and health also. Somewhat composite but critics find it still grossly inadequate. Anyway, using the data of 2010 this new approach puts the official estimate of poor in India as 32.7% - an improvement from 37% based on 2005 data.

Recently, the World Bank and the Asian Development Bank (ADB) released separate reports estimating global poverty based on most recent data. The World Bank report upped its benchmark of extreme poverty from $1 to $1.25 per person a day and the ADB announced an even higher poverty benchmark of $1.35 per person a day. Depending on which benchmark is used, 42% to 55% Indians live in extreme poverty.

The new World Bank benchmark is "the average of the national poverty lines of the world's 15 poorest countries". The ADB's benchmark is Asia-specific and is based on surveys from 16 Asian countries.

Dissecting these numbers provide further insight regarding poverty in India. By World Bank's old measure, 267 million Indians (almost a quarter of the population) lived on less than $1 a day in 2005. Raise the benchmark by a quarter, another 190 million gets added to the tally of the poor. The next 170 million earn a mere 10 cents more. It is clear that slight change in the line can give widely different estimation of poverty. Just look at the following graph of poverty by the World Bank at various poverty lines.

Compare these numbers with the most recent (April 2011) estimate of poverty based on 2010 data: 32.7% of the Indian population lives below the poverty line. It is a decrease from 37% based on the 2005 date. Most experts feel that the official poverty line in India is actually a starvation line; therefore, it gives a gross underestimation of real poverty.

The UN’s Millennium Development Goals (MDGs), aiming to cut the world poverty to half by 2015, were adopted in 2000 by the world leaders. The eight goals (MDGs), break down into 21 quantifiable targets and measured by 60 indicators, provide concrete numerical targets for tackling extreme poverty in its several dimensions.

The MDGs provide framework for eradication of poverty by eliminating extreme poverty hunger, promoting education and gender equality, reducing child mortality, improving maternal health, combating HIV/AIDS, malaria and other diseases, etc.

According to the Global Monitoring Report (a joint IMF-World Bank report), the number of people living in extreme poverty (on less than $1.25 per day) will drop to 883 million by 2015, from 1.4 billion in 2005 and 1.8 billion in 1990.

MDGs Progress in India: A 2009 UN report points to the uneven progress of MDGs in India. It advised that the laggard Indian States – Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Maharashtra, Orissa, Uttar Pradesh and Uttarakhand – need to do more if India has to achieve the MDG of halving poverty by 2015. Poor in these states currently form 64 percent of the country’s poor; this will likely increase to 71 percent by 2015.

1. Human Poverty Index (HPI)

The UN’s Human Poverty Index (HPI) is a widely used measure of a country’s progress and has been often used as a poverty indicator. It is a composite index that measures a country's average progress in three basic aspects of human development: longevity, knowledge, and standard of living. So, it concentrates on deprivation in these three areas.

• The first deprivation relates to survival – the likelihood of death before the age of 40.
• The second aspect relates to knowledge – those who are excluded from reading and communication (the level of illiteracy)
• The third dimension incorporates a measure of standard of living – percentages of people without lack of safe drinking water and undernourished children.

Being a composite measure, the HPI gives a more comprehensive picture of poverty in a country than the income line. The method of calculation differs for the poor countries (HPI-1) and the rich countries (HPI-2) and the two are not comparable.

Of the 182 countries ranked in 2009, Niger is at the tail end preceded by Afghanistan. The best country is Norway followed by Australia and Iceland at 2 and 3 rank; Japan is at 10, US at 13 and UK, 21; China at 92 position and India is at 134.

2. Multidimensional Poverty Index (MPI)

In July 2010, a new measure of poverty, called Multidimensional Poverty Index (MPI), was released by the UK-based Oxford Poverty and Human Development Initiative (OPHI) and the United Nations Development Program (UNDP). The new measure attempts to go beyond income poverty to give a broader understanding of the many types of deprivation the poor may face.

It is more comprehensive than the HPI and is composed of ten weighted indicators that measure education, health and standard of living: years of schooling and child enrollment (education); child mortality and nutrition (health); and electricity, flooring, drinking water, sanitation, cooking fuel and assets (standard of living).

The MPI measures both the incidence of poverty and its intensity. A person is defined as poor if he or she is deprived on at least 3 of the 10 indicators. By this definition, 55% of India was poor, much higher than the official figure of 27% (now stands revised to 32.7% for 2010 data). Almost 20% of Indians are deprived on 6 of the 10 indicators.

In also points to the fact that South Asia has the world's highest levels of poverty: Fifty-one percent of the population of Pakistan is MPI poor, 58% in Bangladesh, and 65% in Nepal; not very different from 55% in India.

For more details analysis of Indian states, please read: Poverty in India: Rediscovering Its Multidimensional Nature.

3. Global Hunger Index (GHI)

The Global Hunger Index (GHI) is a multidimensional measure of malnutrition and hunger. It scores countries based on three equally weighted indicators: the proportion of people who are undernourished, the proportion of children under five who are underweight, and the child mortality rate. The International Food Policy Research Institute (IFPRI) in association with an Irish group, Concern Worldwide and a German group, Welthungerhilfe publishes it every year.

In 2010 the GHI was calculated for 122 countries; India ranked 67, way below China and Pakistan. The report pointed out that India scores badly on this index due to high levels of child underweight resulting from the low nutritional and social status of women in the country. [This is a telling comment on high level of gender inequality in India] India is home to 42 per cent of the world's underweight children, while Pakistan has just 5 per cent

For detailed analysis, you may like to read: Understanding Indian Poverty through the Hunger Index.

It is clear that different poverty indices reveal somewhat different picture of socioeconomic and cultural realities. It is important that the poverty is correctly measured because it provides the basis for government policies. Government of India has several programs for the benefits of the poor, so if the right candidates are not identified the benefits will not reach them and poverty will continue despite expenditure.

Indian economists should come up with a multidimensional measure of poverty that incorporates local discriminations based on gender, caste, and community; parameters for early or child marriage, domestic violence, and violence against women, land holding pattern, etc. The high GDP growth of recent has little relevance for the poor who have been secluded from the growth story.

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